By Jon Peterson
San Francisco-based DivcoWest Properties has received a $75 million commitment from the Texas Municipal Retirement System for its newest commingled fund, DivcoWest Fund V. This information was stated by the pension fund in a board meeting document in late March.
DivcoWest declined to comment when its company representative was contacted for this story.[contextly_sidebar id=”Iq6fo9ibYdOrrp7Ex4MZIiv1oOFKqj7T”]Texas Municipal wrote in a board meeting document that Divco will invest in office/R&D properties across the United States with expected emphasis on the western part of the county. Among its targeted markets are the San Francisco Bay Area and Seattle.
Texas Municipal sees a value-add approach for Fund V. The investor stated in a board meeting document that the strategy for the fund will be to invest in value-add properties in high growth markets, looking primarily at job growth and office space demand as key indicators.
DivcoWest is looking at having its biggest capital raise ever for Fund V, which would come to $1.5 billion. The real estate manager had raised $976 million for DivcoWest Fund IV. This capital raise was completed in May of 2014.
The real estate manager is looking at a leverage amount on a portfolio basis to come in at around 65 percent. This would give the commingled fund a total capitalization of $4.29 billion. The targeted returns for the commingled fund is a 10 percent to 13 percent net IRR.
DivcoWest will be looking at a couple of different kinds of deals for Fund V. Most of the activity is expected to come from existing assets that have a value-add component. The firm could also be placing some equity into new development projects. Many of the properties in the new commingled fund will most likely target properties that would attract technology tenants.
DivcoWest has a long history of value-add investing. Texas Municipal wrote in a board meeting document that the manager has a 23-year history of operating and investing in real estate. Its total assets under management are $4.7 billion.